Energy costs continue to surge. When the temperatures drop this winter, it’ll cost more than ever to keep your house warm and your showers hot. Find out the most affordable way to get the heat you need.
If you’re planning to renovate, or have a heating appliance on its last legs, it could be time to embrace a different heating technology to lower your annual costs.
We took average power plan data from our Powerswitch website, and retail prices for firewood, wood pellets and LPG up and down the country, and crunched the numbers on how different fuel costs compare to one another this winter.
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Cheapest water heating: electric cylinders, gas or wetbacks?
BEST: Hot water heat pumps are expensive to install but, as they’re the cheapest way to heat water, can pay themselves off over a 15-year lifespan. They particularly suit households with higher-than-average usage.
A wetback woodburner is another option that will pay for itself over time, especially if you have access to a cheap source of wood.
A few years ago, natural gas water heaters were clearly the cheapest option. However, huge hikes in the price of natural gas (methane) have now made them less cost-effective than heat pump water heaters and wetbacks. A gas water heater you install today could be economically unviable before the end of its lifetime.
The electric hot water cylinder is an iconic feature of the Kiwi home, but it’s one of the least cost-effective methods for heating water. However, if your existing electric cylinder is still going strong, the cost of buying and installing a different type of heater will usually outweigh any savings in running costs. Buying a new electric cylinder is a decent option if you don’t use much hot water, you live somewhere with cheap electricity, or you just want the cheapest upfront installation costs.
WORST: Whatever you do, don’t install a gas water heater that uses bottled LPG.
How to use less hot water
Regardless of how you heat your water, the best way to reduce your bill is to cut back on usage.
Cheapest space heating: heat pumps, woodburners or LPG?
How much are daily energy charges?
Daily charges are up 40% since 2023 – and nearly everybody needs to cough up for them. The only way to avoid them is by disconnecting completely from the national grid, which isn’t realistic for many of us (and has its own costs).
This year, the average annual connection charge for electricity reached $992 a year. Households now pay over $2.70 a day for the privilege of being connected to the national grid – before they’ve even switched on a light.
Natural gas rose to $834 for the year. Gas users are now paying an average of $70 a month simply to maintain their connection.
30+ ways to make your home more energy efficient
See our ideas for saving energy in your home. Just making one or two changes can help.
Which fuels are best for the environment?
Some heating fuels are much more environmentally friendly than others.
Carbon-neutral
Firewood is a good, eco-conscious heating option, as long as you’re using a woodburner, not an open fire. Make sure you burn dry wood and burn it hot, to minimise emissions and get more heat overall. Burning wet wood generates significant pollution, as do open fires.
Wood pellets for pellet burners are made from sawmill waste. As a byproduct of an existing industry, they create an even smaller environmental footprint.
Low-emissions
Electricity is a reasonably sustainable and low-emissions option – 85% of New Zealand’s electricity generation came from renewable sources in 2024 (the latest period the government has published data for).
The government was working towards 100% renewable electricity generation by 2030, but it abandoned that target in 2024.
A larger portion of the electricity used during the peak times of 7–10am and 5–9pm on weekdays is generated from gas and coal, while close to 100% of electricity used outside of those times comes from renewable sources. To minimise the environmental impact of your heating, try to use your electric space heater less during peak times. You can also save money by switching to a time-of-use plan.
Carbon-emitting
Natural gas (i.e. methane) and LPG are fossil fuels that release carbon dioxide when burned.
Could solar save you money?
Photovoltaic (PV) panels mounted on your roof will generate electricity whenever the sun shines. The electricity can supply your home’s energy needs, including water heating, and you can sell any surplus power back into the national grid.
The economics of solar depend on where you live, your home’s position, and how you use electricity. Costs have come down a lot in the past few years, and many households will now be able to pay off a PV system within 10 years. For more, see our article on whether solar panels are right for your home.
Solar is best suited to homes that use electricity as it’s generated. Batteries can store excess power to use later, and can make you more resilient to emergencies, but they’re expensive to install.
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